City Procurement: Change and Continuity
Recent changes to the City of New York's procurement process have increased the flexibility of city agencies in procuring goods and services and create a framework for increased speed and efficiency in the award of city-funded contracts for services to certain of the city's residents. At the same time, procurements by city agencies continue to be challenged, and must be defended, on grounds relating to procurement procedures. Activities relating to contracting and procurement are primarily the responsibility of two divisions of the Law Department: the Contracts and Real Estate Division, and the Commercial and Real Estate Litigation Division.
Innovations in Procurement
Attorneys of the Contracts and Real Estate Division, through their review of procurement rules and executive orders and the advice they give to city agencies on the laws governing procurement, play an indispensable role in implementing changes in this area. Two recent procurement innovations have received considerable attention from the division: "best value" procurements and the HHS Accelerator.
'Best Value' Procurements. General Municipal Law §103 is the basic instruction to municipalities as to how they may procure "public work" and "purchase" contracts. Public work contracts generally involve construction projects, but also include repair, alteration, or expansion of a public work. Purchase contracts involve the purchase of goods and also those services that do not involve specialized skills or the exercise of judgment. With certain exceptions, GML §103 has long required that these contracts be awarded through a competitive sealed bid process to the lowest responsible bidder. This requirement ensures that goods and services are obtained for the city at the lowest possible price and protects against favoritism, fraud and corruption in the award of public contracts. However, it has also created a degree of inflexibility in the city's procurement process.
Recently, this problem has been addressed by the state Legislature's enactment of a statute that amends GML §103 to permit "best value" procurement of purchase contracts. L. 2011, ch. 608; L. 2012, ch. 2. As described below, this opens the way for significant changes leading to greater flexibility in the way in which city agencies may procure goods and some services within the protective framework of the statute.
GML §103 now authorizes the award of purchase contracts to either the lowest bidder or to the bidder representing the "best value" to the city, as that phrase is defined in the State Finance Law. Under §163 of that law, best value is defined to be the best combination of quality, cost and efficiency. In addition, this definition specifically authorizes agencies to utilize a quantitative factor for certain small businesses and minority and women-owned businesses to be used in the evaluation of best value. Whether to award a purchase contract on the basis of low bid or best value is, in each instance, within the city's discretion.
In addition to state and local law, procurements by city agencies are governed by the rules of the city's Procurement Policy Board (PPB), set forth in Title 9 of the Rules of the City of New York (RCNY). These rules have recently been amended to implement the best value principles authorized by GML §103. See 9 RCNY §§3-02 (competitive sealed bidding) and 3-03 (competitive sealed proposals). Under the new rules, city agencies may procure goods or standardized services pursuant to the best value approach either by "best value bids" or by "best value proposals."
For best value bids, the agency must make clear in its invitation for bids that the award will be made on the basis of best value to the city and must set forth the criteria that the agency will consider in addition to price. Factors that the agency may take into account include features of the product or service set forth in the vendor's specifications, and warranties or maintenance to be provided with the product or service. Award must be made to the responsive and responsible bidder whose bid meets the requirements and criteria set forth in the invitation for bids, and whose bid represents the best value to the city by optimizing quality, cost and efficiency. In determining best value in the bid context, the agency may consider only the low responsive bid and other responsive bids that are within 10 percent of the low responsive bid, unless the city's chief procurement officer approves a higher percentage.
HHS Accelerator. HHS Accelerator is an initiative of Linda Gibbs, Deputy Mayor for Health and Human Services in the Bloomberg administration, to centralize certain administrative functions in the procurement of client services for youth, families, the elderly and other third-party targeted groups through a web-based document repository, universally applicable prequalification of contractors, and a master services agreement known as the Standard Human Services Contract. This initiative is intended to streamline the process of procuring these services by reducing the duplication created by the city current management of approximately 220 client service programs across 11 agencies. "HHS Accelerator" is both the name of an office—managed by the HHS Accelerator director, who is designated by the mayor—and the name of a procurement method set forth in the PPB Rules.
HHS Accelerator has established a web-based document repository that allows potential city contractors to share documents with the city on a common platform, thus significantly reducing duplicative requests for documentation. HHS Accelerator also allows the city to match specific procurements to specific vendor capabilities. Under HHS Accelerator, contractors apply to be prequalified to provide specific services in specific areas. A contractor is prequalified based on its ability to demonstrate the capability to perform. Specific procurements may then be targeted to eligible vendors.
The PPB recently adopted new rules to implement HHS Accelerator, and these rules will take effect by the end of this year. The major new rule is Section 3-16 of the PPB Rules, 9 RCNY §3-16. Under the new rule, the HHS Accelerator office establishes one centralized, citywide list of prequalified client services vendors that all city agencies will use for client service solicitations. The prequalification list is maintained by the HHS Accelerator office, and the HHS Accelerator director makes prequalification determinations for the 11 affected city agencies. Inclusion on the list establishes the vendor's ability to provide specific client services.
With a few exceptions, competitive solicitations for client services encompassed in the new program must be issued through HHS Accelerator, so that only those vendors who are prequalified will be eligible to compete to receive client services awards. Every solicitation under HHS Accelerator will be publicly advertised to allow vendors an opportunity to apply for prequalification, but only vendors who are prequalified will be eligible to submit a proposal in response to an RFP issued through HHS Accelerator.